FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:**Revenue and Expense Data for Tannenhill Company and Electronics Industry**
The following is a comparison of revenue and expense data for the current calendar year for Tannenhill Company and the electronics industry. Tannenhill’s data are expressed in dollars, while the electronics industry averages are expressed in percentages.
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| **Description** | **Tannenhill Company** | **Electronics Industry Average** |
|----------------------------------|------------------------|----------------------------------|
| **Sales** | $2,320,000 | 100% |
| **Cost of merchandise sold** | 1,624,000 | 73% |
| **Gross profit** | $696,000 | 27% |
| **Selling expenses** | 394,400 | 15% |
| **Administrative expenses** | 162,400 | 6% |
| **Total operating expenses** | $556,800 | 21% |
| **Income from operations** | $139,200 | 6% |
| **Other revenue and expense** | | |
| Other revenue**| 46,400 | 2% |
| Other expense**| (23,200) | 1% |
| **Income before income tax expense**| $162,400 | 7% |
| **Income tax expense** | 69,500 | 4% |
| **Net income** | $92,900 | 3% |
**Explanation:**
- **Sales:** Tannenhill Company made sales of $2,320,000, equivalent to 100% in the industry average.
- **Cost of Merchandise Sold:** Tannenhill spent $1,624,000 on merchandise, which is 73% of sales, similar to the industry average.
- **Gross Profit:** After costs, Tannenhill's gross profit stands at $696,000, matching a 27% industry average.
- **Selling Expenses:** Tannenhill's selling expenses are $394,400, equating to 15% of sales, aligned with the industry.
- **Administrative Expenses:** These expenses are $162,400 for Tannenhill and 6% for the industry.
- **Total Operating Expenses:**
Transcribed Image Text:**Tannenhill Company Common-Sized Income Statement for the Year Ended December 31**
| Description | Tannenhill Company Amount | Tannenhill Company Percent | Electronics Industry Average |
|-------------------------------|---------------------------|----------------------------|------------------------------|
| Sales | $2,300,000 | | 100.0% |
| Cost of merchandise sold | 1,624,000 | | 73% |
| Gross profit | 696,000 | | 27% |
| Selling expenses | 394,400 | | 14% |
| Administrative expenses | 162,400 | | 6% |
| Total operating expenses | 556,800 | | 21% |
| Income from operations | 139,200 | | 6% |
| Other revenue and expenses: | | | |
| - Other revenue | 46,400 | | 2% |
| - Other expense | (23,200) | | 1% |
| Income before income tax | 162,400 | | 7% |
| Income tax expense | 69,600 | | 4% |
| Net income | 92,800 | | 3% |
**b. Observations:**
The company is managing the cost of manufacturing products **better** than the industry, and has slightly **higher** selling and administrative expenses relative to the industry. The combined impact causes net income as a percent of sales to be **slightly lower** than the industry average.
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